U.S. patent application number 12/970852 was filed with the patent office on 2011-06-16 for system and method for auctioning environmental commodities.
This patent application is currently assigned to Skystream Markets, Inc.. Invention is credited to David Bredesen, Kent Gibson, Eftichi Goumas, Naeem Hukkawala, Kapil Mohindra, Karin Wichman.
Application Number | 20110145128 12/970852 |
Document ID | / |
Family ID | 44143986 |
Filed Date | 2011-06-16 |
United States Patent
Application |
20110145128 |
Kind Code |
A1 |
Hukkawala; Naeem ; et
al. |
June 16, 2011 |
System and Method for Auctioning Environmental Commodities
Abstract
An institutionally-focused, neutral auction platform is provided
that may be utilized for both the primary and secondary trading of
environmental commodities and instruments. The auction platform may
perform an on-boarding process for auction participants.
Thereafter, the auction platform initiates an auction event, in
response to a request by an auctioner, based on an identified block
of environmental commodities. The auction platform may also receive
an indication of financial security from one or more of the auction
participants. A winning bidder may then be selected based on
auctioner-defined parameters. In certain embodiments, the auction
platform may also perform a settlement function for the auctioner
and winning bidder relating to the delivery of, and payment for,
the identified block of environmental commodities. Various other
services and processes may also be provided by the auction
platform.
Inventors: |
Hukkawala; Naeem; (Brooklyn,
NY) ; Mohindra; Kapil; (New York, NY) ;
Gibson; Kent; (South Orange, NJ) ; Bredesen;
David; (New York, NY) ; Goumas; Eftichi; (New
York, NY) ; Wichman; Karin; (Darien, CT) |
Assignee: |
Skystream Markets, Inc.
New York
NY
|
Family ID: |
44143986 |
Appl. No.: |
12/970852 |
Filed: |
December 16, 2010 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
|
61286891 |
Dec 16, 2009 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101;
G06Q 30/08 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/00 20060101
G06Q040/00 |
Claims
1. A method for auctioning environmental commodities on a neutral
trading platform in an online environment, wherein the neutral
trading platform is implemented using an auction platform server
coupled to a network, the method comprising the acts of: executing,
by the auction platform server, an on-boarding process for a
plurality of auction participants, which includes an auctioner,
wherein the plurality of auction participants utilize client-side
devices to access the auction platform server over the network, and
wherein the on-boarding process includes having the trading
platform enter into one of a subscription agreement, brokerage
agreement and auction-specific agreement with the plurality of
auction participants; initiating, by the auction platform server in
response to a request by the auctioner, an auction event based on
an identified block of environmental commodities; receiving, by the
auction platform server over the network, an indication of
financial security from at least one of the plurality of auction
participants; receiving, by the auction platform server over the
network, a plurality of bids for the identified block of
environmental commodities from the plurality of auction
participants; validating, by the auction platform server, said
plurality of bids against a predetermined set of criteria, wherein
a winning bidder, from the plurality of auction participants, is
selected following said validating using one of an automated fills
methodology and auctioner-defined parameters; and performing a
settlement function for the auctioner and the winning bidder for
the delivery of, and payment for, said identified block of
environmental commodities.
2. The method of claim 1, wherein said auction event is one of a
single-term unilateral auction, a multi-term unilateral auction,
and a multilateral auction.
3. The method of claim 1, wherein the environmental commodities to
be auctioned comprise at least one of renewable energy
certificates, carbon offsets, carbon allowances, and energy
efficiency credits.
4. The method of claim 1, wherein the indication of financial
security comprises one of a trading agreement, financial
security/collateral posted to an escrow account, and a waiver of
the financial security requirement.
5. The method of claim 1, further comprising receiving, as part of
said on-boarding process, client information, including
client-defined settlement instructions, for each of the plurality
of auction participants, and wherein said client information is
stored by the auction platform server in client profiles
corresponding to the plurality of auction participants.
6. The method of claim 1, further comprising providing a financial
reporting service to the auctioner and the winning bidder, wherein
the financial reporting service comprises forwarding financial
reports, over the network, to individual counterparties.
7. The method of claim 1, further comprising providing a credit
monitoring service to the auctioner and the winning bidder, wherein
the credit monitoring service comprises monitoring counterparty
credit ratings and providing notices upon credit change events.
8. The method of claim 1, wherein validating said plurality of bids
against a predetermined set of criteria comprises verifying that
each of said plurality of bids is greater than a reserve price set
by a seller for the identified block of environmental commodities,
and also less than a compliance price for said identified
block.
9. The method of claim 1, wherein receiving the plurality of bids
for the identified block of environmental commodities comprises
receiving the plurality of bids for a plurality of client-defined
time ranges corresponding to the identified block of environmental
commodities.
10. The method of claim 1, further comprising providing, by the
auction platform server over the network, a plurality of bid curves
corresponding to the plurality of bids, from which the auctioner
may select the winning bidder.
11. The method of claim 1, wherein the auction event is a reverse
auction and the auctioner is a buyer.
12. The method of claim 1, further comprising providing, by the
auction platform server, post-trading confirmation and reporting
services, corresponding to the auction event, for one or more of
the plurality of auction participants.
13. The method of claim 1, further comprising providing, by the
auction platform server, collateral management services,
corresponding to the auction event, for one or more of the
plurality of auction participants.
14. An auction platform server configured to implement a neutral
trading platform in an online environment, the server comprising: a
network interface configured to connect the server to a network; a
processor electrically coupled to the network interface; and a
memory electrically coupled to the processor, the memory containing
processor-executable instructions for implementing the neutral
trading platform, wherein the server configured to: execute an
on-boarding process for each of a plurality of auction
participants, which includes an auctioner, wherein the plurality of
auction participants utilize client-side devices to access the
auction platform server over the network, and wherein the
on-boarding process includes having the trading platform enter into
one of a subscription agreement, brokerage agreement and
auction-specific agreement with each of the plurality of auction
participants, initiate an auction event, in response to a request
from the auctioner, based on an identified block of environmental
commodities, receive, over the network, an indication of financial
security from at least one of the plurality of auction
participants, receive, over the network, a plurality of bids for
the identified block of environmental commodities from one or more
of the plurality of auction participants, validate said plurality
of bids against a predetermined set of criteria, wherein a winning
bidder, from the plurality of auction participants, is selected
using one of an automated fills methodology and auctioner-defined
parameters, and perform a settlement function for the auctioner and
the winning bidder for the delivery of, and payment for, said
identified block of environmental commodities.
15. The auction platform server of claim 14, wherein said auction
event is one of a single-term unilateral auction, a multi-term
unilateral auction, and a multilateral auction.
16. The auction platform server of claim 14, wherein the
environmental commodities to be auctioned comprise at least one of
renewable energy certificates, carbon offsets, carbon allowances,
and energy efficiency credits.
17. The auction platform server of claim 14, wherein the indication
of financial security comprises one of a trading agreement,
financial security/collateral posted to an escrow account, and a
waiver of the financial security requirement.
18. The auction platform server of claim 14, wherein the server is
further configured to receive, as part of said on-boarding process,
client information, including client-defined settlement
instructions, for each of the plurality of auction participants,
and wherein said client information is stored by the auction
platform server in client profiles corresponding to the plurality
of auction participants.
19. The auction platform server of claim 14, wherein the server is
further configured to provide a financial reporting service to the
auctioner and the winning bidder, wherein the financial reporting
service comprises forwarding financial reports, over the network,
to individual counterparties.
20. The auction platform server of claim 14, wherein the server is
further configured to provide a credit monitoring service to the
auctioner and the winning bidder, wherein the credit monitoring
service comprises monitoring counterparty credit ratings and
providing notices upon credit change events.
21. The auction platform server of claim 14, wherein the plurality
of bids are validated by verifying that each of said plurality of
bids is greater than a reserve price set by a seller for the
identified block of environmental commodities, and also less than a
compliance price for said identified block.
22. The auction platform server of claim 14, wherein the plurality
of bids for the identified block of environmental commodities are
provided for a plurality of client-defined time ranges
corresponding to the identified block of environmental
commodities.
23. The auction platform server of claim 14, wherein the server is
further configured to provide, over the network, a plurality of bid
curves corresponding to the plurality of bids, from which the
auctioner may select the winning bidder.
24. The auction platform server of claim 14, wherein the auction
event is a reverse auction and the auctioner is a buyer.
25. The auction platform server of claim 14, wherein the server is
further configured to provide post-trading confirmation and
reporting services, corresponding to the auction event, for one or
more of the plurality of auction participants.
26. The auction platform server of claim 14, wherein the server is
further configured to provide collateral management services,
corresponding to the auction event, for one or more of the
plurality of auction participants.
27. A computer program product, comprising: a processor readable
medium having processor executable code embodied therein for
auctioning environmental commodities on a neutral trading platform
in an online environment, the processor readable medium having:
processor executable program code to execute an on-boarding process
for each of a plurality of auction participants, which includes an
auctioner, wherein the plurality of auction participants utilize
client-side devices to access the auction platform server over the
network, and wherein the on-boarding process includes having the
trading platform enter into one of a subscription agreement,
brokerage agreement and auction-specific agreement with each of the
plurality of auction participants, processor executable program
code to initiate an auction event, in response to a request by the
auctioner, based on an identified block of environmental
commodities, processor executable program code to receive, over a
network connection, an indication of financial security from at
least one of the plurality of auction participants, processor
executable program code to receive, over the network connection, a
plurality of bids for the identified block of environmental
commodities from the plurality of auction participants, processor
executable program code to validate said plurality of bids against
a predetermined set of criteria, wherein a winning bidder, from the
plurality of auction participants, is selected following said
validation using one of an automated fills methodology and
auctioner-defined parameters, and processor executable program code
to perform a settlement function for the auctioner and the winning
bidder for the delivery of, and payment for, said identified block
of environmental commodities.
Description
CROSS REFERENCE TO RELATED APPLICATION
[0001] This application claims the benefit of U.S. Provisional
Patent Application No. 61/286,891, filed Dec. 16, 2009.
FIELD OF THE INVENTION
[0002] The present invention relates to auctioning of environmental
commodities, and more particularly to providing an
institutionally-focused system, method and architecture by which
environmental commodities may be auctioned on a neutral platform
such that buyers are provided with accessible liquidity and sellers
are provided with competitive bid or offer prices.
BACKGROUND
[0003] Broadly speaking, an auction is a process of buying and
selling goods or services whereby a seller first offers such goods
or services up for bid, accepts bids from potential buyers, and
then sells the goods or services to the highest bidder. And while
auctions themselves have been recorded as early as 500 B.C., it is
only in the last decade that a number of environmental commodities
have been created. Such environmental commodities include Renewable
Energy Certificates (RECs), Carbon Offsets, Carbon Allowances and
so-called white certificates (e.g., Energy Efficiency Credits).
[0004] While there have been some attempts to implement auctions
for environmental commodities, such approaches are limited in
several respects. In addition to being very rudimentary, known
methodologies for environmental commodity auctioning suffer from
numerous drawbacks. For example, current platforms are not
institutionally focused, are exclusively limited to spot auctions,
and provide no mechanism for trading relationships to be
established, and do not manage post-trade processing and reporting.
Additionally, there is no current solution which adequately
addresses the credit risk issue. Thus, there is a need for an
improved system and method of auctioning environmental commodities
which overcomes one or more of the aforementioned drawbacks.
BRIEF DESCRIPTION OF THE DRAWINGS
[0005] The features, objects, and advantages of the present
invention will become more apparent from the detailed description
set forth below when taken in conjunction with the drawings in
which like reference characters identify correspondingly throughout
and wherein:
[0006] FIG. 1A depicts an auction platform architecture configured
to implement one or more aspects of the invention;
[0007] FIG. 1B illustrates a credit & financial security module
of the architecture depicted in FIG. 1A, configured with accordance
with the principles of the invention;
[0008] FIG. 2 depicts a system in a network environment configured
to implementing one or more aspects of the invention;
[0009] FIGS. 3A-3C depict exemplary graphical user interfaces
relating to certain aspects of the auction monitoring functionality
of the invention;
[0010] FIG. 4A illustrates an example of the auction module
depicted in FIG. 1A configured to implement a single-term
unilateral auction;
[0011] FIGS. 4B-4C depict exemplary graphical user interfaces
(GUIs) relating to the auction module of FIG. 4A;
[0012] FIG. 5A illustrates an example of an auction module of the
architecture depicted in FIG. 1A configured to implement a two
round multi-term unilateral auction;
[0013] FIG. 5B illustrates another example of an auction module of
the architecture depicted in FIG. 1A configured to implement a
single round multi-term unilateral auction;
[0014] FIGS. 5C-5H depict exemplary GUIs relating to the auction
modules of FIGS. 5A and 5B;
[0015] FIG. 6A illustrates another embodiment of an auction module
of the architecture depicted in FIG. 1A configured to implement a
multilateral auction;
[0016] FIGS. 6B-6C depict exemplary GUIs relating to the auction
module of in FIG. 6A;
[0017] FIG. 7 illustrates a post auction module of the architecture
depicted in FIG. 1A, configured with accordance with the principles
of the invention; and
[0018] FIGS. 8A-8D depict various embodiments of post auction
modules of the architecture depicted in FIG. 1A, configured with
accordance with the principles of the invention.
SUMMARY OF THE INVENTION
[0019] Disclosed and claimed herein is a method, server and
computer program product for auctioning environmental commodities
on a neutral trading platform in an online environment. In certain
embodiments, the neutral trading platform is implemented using an
auction platform server coupled to a network. One method of
carrying out the invention is to execute, by the auction platform
server, an on-boarding process for the auction participants, which
include an auctioner. The auction participants may utilize
client-side devices to access the auction platform server over the
network. In certain embodiments the on-boarding process includes
having the trading platform enter into one of a subscription
agreement, brokerage agreement and auction-specific agreement with
each of the auction participants. The method may further include
initiating, by the auction platform server and in response to a
request by the auctioner, an auction event based on an identified
block of environmental commodities. Thereafter, the auction
platform server may receive an indication of financial security
from one or more of the auction participants. The method further
includes receiving, by the auction platform server over the
network, various bids for the identified block of environmental
commodities from the auction participants. Once the bids have been
validated against a predetermined set of criteria, a winning bidder
may be selected using one of an automated fills methodology and
auctioner-defined parameters. In certain embodiments, the auction
platform may also perform a settlement function for delivery of,
and payment for, the identified block of environmental
commodities.
[0020] Other aspects, features, and techniques of the invention
will be apparent to one skilled in the relevant art in view of the
following description of the exemplary embodiments of the
invention.
DETAILED DESCRIPTION OF EXEMPLARY EMBODIMENTS
Disclosure Overview
[0021] One aspect of the present disclosure relates to providing an
auction platform that may be utilized for both the primary and
secondary trading of environmental commodities and instruments,
including RECs, Carbon Allowances, Carbon Offsets, and Energy
Efficiency Credit, although it should be appreciated that any other
type of environmental commodities/instrument may be similarly
auctioned in accordance with the principles of the invention
disclosed herein.
[0022] In one embodiment, the auction platform may provide a unique
service to the environmental commodities market by offering a
neutral platform for both buyers and sellers to achieve competitive
transactions. More specifically, the invention may provide
accessible liquidity for buyers, while also providing competitive
sealed bid prices for sellers.
[0023] Another aspect of the invention is to implement the auction
platform in terms of a "multi-term auction," which provides the
ability to auction a forward stream on both a firm and/or
contingent basis. Alternatively, the invention may be implemented
as a "multilateral auction," whereby two rounds of processing are
used to establish a market clearing price and a subsequent trading
period.
[0024] Still another aspect is to provide complete credit/financial
security that supports both prior established trading relationships
(based on terms of written agreement), as well as ad hoc trading.
Additionally, the principles of the invention envision a structured
data reporting mechanism and interface for individual auction
events that may be used for valuation and analytics.
[0025] Additional aspects of the invention, which will be described
in more detail below, include automated trade confirmation and
processing, operational processes for the fulfillment of financial
reporting requirements and credit monitoring, and collateral and
settlement reporting. Additionally, the auction platform disclosed
and claimed herein may further provide for collateral management,
including a standardized process for collateral adjustments and
financial security allocation for multiple partners in multi-term
auctions.
[0026] It should be appreciated that the auction platform of the
present invention may be implemented in a client-server type
architecture in which the individual users access one or more
remote servers over a network using a client application that
executes on a client-side computer. The auction platform itself may
then reside on one or more remote servers that are accessible to
the client-side computer. Alternatively, the client-side computers
may access the auction platform server using a browser-type
application.
[0027] As used herein, the term "financial security" refers to
collateral posted to support participation in an auction. The term
"holding account" refers to an account used to house instruments to
be auctioned. The term "vintage" means the date of issuance for a
particular environmental commodity (e.g., REC). Different
regulatory bodies have different procedures and periods (i.e.,
vintages) for issuing environmental commodities. While the general
term "auction" refers to an auction event in which there are
multiple buyers and a single seller, a "reverse auction" refers to
an auction event in which the roles of buyers and sellers are
reversed such that there are multiple sellers, but only a single
buyer. Additionally, the term "auctioner" means a party who
initiates an auction, which is the seller in the case an auction,
or is the buyer in the case of a reverse auction. It should be
appreciated that the principles of the invention, as disclosed
herein, may be equally applicable to auctions and reverse
auctions.
[0028] While the following disclosure refers principally to the REC
market, this is intended to be an exemplary embodiment only and may
equally be applied to any other environmental
commodities/instrument or hybrid thereof. Similarly, while many of
the exemplary embodiments which follow are in terms of a
traditional auction having a single seller and multiple buyers, it
should be appreciated that each and everyone of those exemplary
embodiments may be equally implemented as a reverse auction.
[0029] As used herein, the terms "a" or "an" shall mean one or more
than one. The term "plurality" shall mean two or more than two. The
term "another" is defined as a second or more. The terms
"including" and/or "having" are open ended (e.g., comprising). The
term "or" as used herein is to be interpreted as inclusive or
meaning any one or any combination. Therefore, "A, B or C" means
"any of the following: A; B; C; A and B; A and C; B and C; A, B and
C". An exception to this definition will occur only when a
combination of elements, functions, steps or acts are in some way
inherently mutually exclusive.
[0030] Reference throughout this document to "one embodiment",
"certain embodiments", "an embodiment" or similar term means that a
particular feature, structure, or characteristic described in
connection with the embodiment is included in at least one
embodiment of the present invention. Thus, the appearances of such
phrases or in various places throughout this specification are not
necessarily all referring to the same embodiment. Furthermore, the
particular features, structures, or characteristics may be combined
in any suitable manner on one or more embodiments without
limitation.
[0031] In accordance with the practices of persons skilled in the
art of computer programming, the invention is described below with
reference to operations that may be performed by a computer system
or a like electronic system. Such operations are sometimes referred
to as being computer-executed. It will be appreciated that
operations that are symbolically represented include the
manipulation by a processor, such as a central processing unit, of
electrical signals representing data bits and the maintenance of
data bits at memory locations, such as in system memory, as well as
other processing of signals. The memory locations where data bits
are maintained are physical locations that have particular
electrical, magnetic, optical, or organic properties corresponding
to the data bits.
[0032] When implemented in software, the elements of the invention
are essentially the processor-executable code segments to perform
the necessary tasks. The code segments can be stored in a
"processor readable medium," which includes any medium that can
store information. Examples of the processor readable medium
include an electronic circuit, a semiconductor memory device, a
ROM, a flash memory or other non-volatile memory, a floppy
diskette, a CD-ROM, an optical disk, a hard disk, etc.
Exemplary Embodiments of the Invention
[0033] Prior to being able to avail oneself of the auction platform
disclosed herein, it should be appreciated that one or more
prerequisites may need to be satisfied. By way of example, in
certain embodiments it may be necessary for each clients (i.e.,
buyer or seller) to complete an "on-boarding"process prior to
participating in any auction event. The on-boarding process may
include having the client enter into a subscription, brokerage
and/or auction-specific registration agreement which covers the
client's responsibilities, liabilities, indemnity, software
licensing rights and the like. Thus, auction participants are
provided a standardized contractual process by which to establish
the necessary contractual relationships with both the platform and
potential counterparties, prior to actually commencing an auction
or other transaction.
[0034] The on-boarding process may be tailored for a specific
auction or on a per-client basis. In particular, the platform may
generate streamlined contracts for use between counterparties as a
"default" agreement based on, for example, the parties involved.
Additionally, the seller may tailor otherwise standard contract
terms before marketing the agreement. In certain cases where the
seller does not have extensive experience, advisory or consulting
contract services may be provided to the seller as part of the
on-boarding process.
[0035] Once the seller selects or finalizes the auction agreement,
the seller may market the agreement either "as is" or open to buyer
negotiation, whereby the auction platform may facilitate any such
negotiation process. Finalized agreement terms may then be
incorporated into the platform's operations systems in order to
provide post-trade services in accordance therewith.
[0036] The on-boarding process may also require the client to
provide some initial baseline information, such as the legal name,
address, contact information and other data corresponding to the
actual legal entity that will be engaging in the trading activity.
During this process, the client-specific settlement instructions
(e.g., instructions for confirmations, return of financial
security, delivery of RECs, etc.) may also be provided and stored
as part of the client's profile.
[0037] Other information that the client may provide includes a
list of authorized users with contact details and authorization
level, and potentially a list of approved counterparties with whom
the particular client has executed credit facilities, e.g. an ISDA
Master Agreement with an executed US Emissions Allowance
Transaction Annex, or a Master Renewable Energy Certificate
Purchase and Sale Agreement. Any such agreement will be generically
referred to herein as a "trading agreement." Included in the list
of counterparties may be associated trading limits and specified
products which are allowed under such trading agreements.
[0038] The client on-boarding process may similarly include such
steps as installing a desktop software auction component on the
client's desktop, performance of connectivity testing and client
training on the auction platform.
[0039] It should of course be appreciated that the client
on-boarding process need not include each of the steps described
above, or may include additional steps not identified above but
otherwise readily known to be useful or necessary in establishing
user access to a trading platform.
[0040] Once the on-boarding process is complete, a client may begin
to engage in trading activities using the auction platform of the
invention. To that end, FIG. 1A depicts one embodiment of the
auction platform 100 of the invention, which is consistent with the
various auction types envisioned and described herein. As shown,
platform 100 includes an auction setup module 110, a credit &
financial security module 120, and auction module 130 and a post
auction module 140. As previously described, the platform 100 may
be implemented using one or more networked-servers that are
accessible by client-side computers executing a client application
or via a browser-type interface.
[0041] With reference first to the auction setup module 110, an
auction event may be initiated when a client identifies a specific
block of RECs to buy or sell on either a single- or multi-term
basis. Alternatively, an auction event may be run on a periodic
basis (e.g., weekly, monthly, quarterly, etc.) depending on the
instrument involved, compliance periods, etc.
[0042] Various parameters may be defined during auction setup as
well. For example, the auction itself may be defined as a
unilateral auction or a multilateral auction. While a unilateral
auction is a single direction event (e.g., seller to buyer), a
multilateral auction is a bi-directional event between participants
that may act as buyers or sellers.
[0043] In the case of a unilateral auction, a seller may submit an
auction request form which may include one or more of the
following: [0044] instrument to be auctioned (State, REC type, Tier
of REC and Compliance price), [0045] vintages to be auctioned,
[0046] quantity, [0047] minimum quantity per bid, and [0048]
reserve price per vintage.
[0049] With respect to the quantity, the auction request may
specify, in addition to the number of RECs to be sold, a minimum
number of RECs per vintage. Additionally, some auctions may also
limit the quantity to some predetermined percentage (e.g., 75%) of
the projected production output per project, also known as the
"firm" amount.
[0050] Continuing to refer to the auction setup module 110, auction
participants may indicate their interest by responding to an alert
or call from the auction platform/staff. In certain embodiments,
this response may include the participant type (e.g., buyer,
seller, or market maker), and the trading size. The auction setup
module 110 may then review trading relationships to determine if
there are any existing trading agreements. If so, then the auction
trading limit referenced in the appropriate trading agreement will
be used.
[0051] If on the other hand there is no existing trading agreement
in place between the participants in question, the auction setup
module 110 may then determine if the prospective participant has
escrow account documentation on file. If so, a financial security
submission form may be sent to the particular participant to
complete prior to delivery of the financial security. On the other
hand, if the prospective participant has not established an escrow
account, the auction setup module 110 may facilitate the execution
of a tri-party escrow agreement with an agent instead.
[0052] Finally, it should be appreciated that the auction setup
module 110 may monitor the number of participants that have
registered to participate since a minimum number of participants
may be required for an auction to run (e.g., 3 buyers and 3
Sellers).
[0053] With reference now to FIG. 1B, depicted in one embodiment of
the credit & financial security module 120 of FIG. 1A. In
particular, financial security module 150 of FIG. 1B can
accommodate three types of credit relationships--trading
relationships based on existing trading agreements, or financial
security posted to an escrow/holding account for a specific auction
event, or relationships in which financial security requirement has
been waived.
[0054] In the case of an escrow/holding account a predetermined
number of business days prior to the auction event (e.g., 2 days)
the seller may be required by the financial security module 150 to
deliver either the RECs to be auctioned to a designated holding
account, or collateral to an escrow account, while the buyer may be
required to deliver its financial security in the form of cash or a
Letter of Credit to the designated escrow account. Similarly,
market makers may be required to deliver either cash or Letter of
Credit to the designated escrow account or RECs to the designated
holding account. While in this example, the auctioner is the
seller, it should similarly be appreciated that the auctioner may
be a buyer, i.e., in the context of a reverse auction.
[0055] In general, the pre-trade standardized financial security
process may comprise having the parties post financial security
prior to auction (e.g., cash, Letter of Credit, guarantee,
insurance, etc.). The amount of the financial security may
similarly be standardized, e.g., 10% of notional amount (reserve
price) for seller, 10% of trading limit for buyer, or any other
fixed percentage. The posted financial security may then be held in
an escrow account by a third party bank pursuant to an escrow
agreement between the bank and the party, with the auction platform
serving as the trustee/administrator.
[0056] Thereafter, the financial security module 150 may review the
designated holding or escrow account to ensure that all required
RECs, cash or Letters of Credit have been received from the
prospective participants. The financial security module 150 may
then post details of deliveries to the system for settlement and
reporting, and set any auction limits based on the financial
security provided or the preexisting trading relationship (i.e.,
agreement terms). In certain embodiments, the RECs may be afforded
an equivalent value calculated by multiplying the number of RECs at
the most recent market price times some predetermined percentage
less than 100% (e.g., multiply by 0.8). Additionally, this reduced
valuation may be applicable only in the case of multilateral
auctions.
[0057] In addition to establishing the financial security prior to
the auction event, participants may also be required to login to
the platform and access an appropriate auction screen (e.g., via a
client-side browser-type application). The auction platform (e.g.,
platform 100) may track users signed in versus those registered for
an auction through the auction setup module 110. In this fashion,
if registered participants have not logged into the specified
auction in time, they may be contacted via phone, email or text to
alert them to the pending auction. Those unable to log onto the
platform may be offered other alternatives for participating in the
auction (e.g., phone participation).
[0058] During the life of the transaction/auction, the platform
(e.g., platform 100) may also provide a financial reporting service
for buyers and sellers. Such financial reporting may be based on
various required public company disclosures (e.g., 10K's, 10Q's,
etc.), as well as available private company financials (e.g.,
quarterly unaudited financials, annual audited financials, etc.).
The financial reporting service may include forwarding such
financial reports to counterparties. This service may be performed
in accordance with a trading agreement, for example.
[0059] In addition to the aforementioned financial reporting
service, one or more modules of the auction platform may further
provide credit monitoring services to ensure compliance with credit
assurance provisions, e.g., from a trading agreement. The credit
monitoring service may be automated and may comprise monitoring
applicable counterparties' credit ratings, and providing notice to
clients upon predetermined credit changes (e.g., a downgrade) that
might trigger or increase the risk of a default event. In the event
of such a credit change, the auction platform may facilitate the
process for posting additional collateral (credit assurance), as
needed.
[0060] Still another service that may be provided by one or more
modules of the auction platform (e.g., platform 100) relates to the
collateral and settlement reporting aspect of the auction process.
In particular, one of the auction platform modules, such as
post-auction module 140, may provide clients with periodic (e.g.,
monthly, quarterly) collateral reports/financial security
statements. Additionally, the auction platform may further
facilitate the negotiation process if a collateral threshold is
breached, or other security event occurs that requires client
negotiation. The auction platform may act as trustee/administrator
of any security escrow account that is involved in the collateral
posting process.
[0061] With respect to post-trade collateral processing, auction
"losers" may have their security returned through the auction
platform. Security for the buyer(s) and seller(s) may also be
adjusted to reflect trade notional and contract requirements.
[0062] Collateral processing services may be provided throughout
the entire life of the trade, including return of collateral upon
delivery of the auctioned commodity, and performing collateral
adjustments as triggered by collateral threshold events, credit
events, etc. The auction platform, as trustee/administrator, would
instruct the applicable bank accordingly.
[0063] With reference now to FIG. 2, depicted is an exemplary
system in which the present invention may be implemented in a
client-server type architecture. Specifically, system 200 comprises
the auction platform 210, which may be platform 100 of FIG. 1A, in
communication with a plurality of individual auction participants
220.sub.1-220.sub.n over a network 230. As previously mentioned, it
should be appreciated that each of the plurality of auction
participants 220.sub.1-220.sub.n may connect to the platform 210
using a client application (or browser-type application) that
executes on a client-side computer. The auction platform 210 may
reside on one or more remote servers 240 that are accessible to the
client-side computer over the network 230. The auction platform may
further comprises one or more databases 250 for storing data
necessary or useful for carrying out the various operations
described herein with respect to the disclosed auction
platform.
[0064] Referring now to FIG. 3A, depicted is one embodiment of a
graphical user interface 300 that may be used by a dedicated
support team responsible for running and supporting auction events.
In this fashion, comprehensive monitoring of all activity during
the entire auction process may be provided so as to ensure the
validity and efficient operation of the auction processes, as well
as provide support to buyers and sellers on a real-time basis.
[0065] Additionally, all clients and support staff may utilize a
bi-directional instant messaging system for communications during
auctions (see FIG. 3B). Participants may also view a screen with a
log of all auction events as they occur (see FIG. 3C).
[0066] Referring now to FIG. 4A, depicted is one embodiment of the
auction module 130 of FIG. 1A. In the embodiment of FIG. 4A, the
auction module 400 is configured to implement a single-term
unilateral auction of RECs (or any other environmental
commodity).
[0067] In the case of a single-term unilateral auction, it may
first be necessary to ensure that a quorum of bidders (e.g., 3)
exists to begin a valid auction. In any event, once the auction
starts the sellers may be provided with access to a screen, such as
screen 410 of FIG. 4B, that will inform them of key events in the
progress of an auction and other statistics while in progress.
[0068] Similarly, buyers may utilize a bidding screen, such as
screen 420 of FIG. 4C, to submit and/or cancel bids. Bidding
continues until the auction time expires. Participants may be given
a warning prior to the close of bidding, followed by an alert once
the auction is closed to further bidding.
[0069] Submitted bids may then be validated by the auction
platform. This validation process may include ensuring that the
quantity bid is limited to the total number of RECs to be auctioned
in a single event and potentially subject to a minimum size as
defined during auction setup. Additionally, the quantity bid may be
limited to the notional amount of the quantity multiplied by the
price submitted and compared to the trading limit established by
external agreements or the financial security. Similarly, the price
bid may be required to be greater than the reserve price, as
indicated in auction setup, and may be no greater than the
compliance price plus some predetermined percentage (e.g., 25%).
This feature may serve as a form of protection for bidders' data
entry error.
[0070] Upon auction validation, bids will be filled on a pro-rata
basis subjected to a predetermined set of rules. For example, bids
may be sorted in descending order by price and quantity with
winners assigned to the bids with the highest price, then
continuing down the list until the entire quantity of the auction
is exhausted. If more than one bid exists at a winning price level,
the bids at that price level may be filled as follows: [0071] if
the total quantity of the winning bids at a price are less than or
equal to the total quantity remaining to be sold, all bids will be
fully filled, or [0072] if the total quantity of the winning bids
at a price exceeds the total quantity remaining to be sold, a
straight percentage calculation will be applied to the quantities
of the bids versus the total quantity to be sold.
[0073] Each winning order may then be filled pro-rata similar to
the percentages calculated. By way of example, assuming 4 bids and
an auction quantity of 100, the bids may be filled as follows:
TABLE-US-00001 Price Quantity Percentage Filled Amount Bid 1 55 60
40.00% 40 Bid 2 55 50 33.33% 33 Bid 3 55 40 26.67% 27 Bid 4 45 10
n/a 0
[0074] Alternatively, the auction platform may support other
auction methodologies, such as the following: [0075] 1. All or
Nothing: Sealed bid auction where bidders will be required to
submit bids for the entirety of quantity to be sold resulting in a
single winning bid. [0076] 2. Rounds of Anonymous bidding:
Simultaneous or consecutive sealed or open bid auctions for each
round specified for a different vintage. [0077] 3. Second price
auction: Sealed bid auction where winning bidder's pay the highest
losing price. [0078] 4. Display Rank: Bidders will be shown their
rank in the auction through the open bidding phase and will
disappear during a time window, e.g. 2-minute window, prior to
auction close. [0079] 5. Market Clearing Price: Sealed bid auction
where bids are sorted in descending order by price and size, with
the clearing price being set by the lowest price to be filled (see
table below for example).
TABLE-US-00002 [0079] Auction Quantity 100 Price Quantity Filled
Amount Clearing Price Bid 1 60 60 60 57 Bid 2 57 50 40 57 Bid 3 55
40 Bid 4 45 10
[0080] Referring now to FIG. 5A, depicted is another embodiment of
the auction module 130 of FIG. 1A. However, in the embodiment of
FIG. 5A, the auction module 500 is configured to implement a
multi-term unilateral auction of RECs (or any other environmental
commodity) in which a single winner is awarded the total quantity
to be sold. With the multi-term unilateral auction, there may be
two rounds in the process--establishing the market midpoint and
identifying the best and final bids--as shown in the embodiment of
FIG. 5A. Alternatively, there may be only a single round which does
not rely on the publishing of a market midpoint, as shown in FIG.
5B.
[0081] In the case of the two-round process of FIG. 5A, once a
quorum of bidders is achieved, bidders can begin submitting bids.
Sellers will be able to monitor key events in the progress of an
auction (see FIG. 5C), while buyers will utilize a bidding screen
to submit and edit bids (see FIG. 5D). Bidding continues until the
auction time expires. Participants may be given a warning prior to
the close of bidding, followed by an alert once the auction is
closed to further bidding.
[0082] Submitted bids may be validated against a predetermined set
of criteria. For example, the price bid for each vintage may be
required to be greater than the reserve price as indicated in
during auction setup, and may be no greater than the compliance
price per vintage plus some percentage (e.g., 25%) as a way to
protect bidders against data entry error.
[0083] Following the close of the first round, the auction platform
may then complete validations to confirm a successful round and
calculate a market midpoint curve, which will then be displayed to
all participants on their respective auction screens.
[0084] During the second round of the embodiment of FIG. 5A, or in
the case of the single round embodiment of FIG. 5B, sellers will be
able to monitor key auction events via their auction screens (see
FIG. 5E), while bidders submit bids via their auction screens (see
FIG. 5F). Validation of the price may be performed to ensure that
the price bid for each vintage is greater than the reserve price
indicated during auction setup, and also not greater than the
compliance price per vintage plus some predetermined
percentage.
[0085] While bidders may submit bids on a fixed-interval basis
auction (e.g., yearly), as shown in FIG. 5F, bidders may
alternatively be provided with the ability to define the time
interval for which a bid should be applied using the concept of
ranges. In particular, rather than entering bids for Year 1, Year
2, etc., bids may be entered for Range 1, Range 2, etc, where each
range is client defined. By way of example, for a 5 year trade,
Range 1 may be defined as inclusive of years 1-3, while Range 2 may
include years 4 and 5. The client-defined ranges may be applied to
a single round sealed bid or "Final" round of bidding.
Additionally, the quantity may be validated at the range level.
Other validations at the range level may include minimum valid bids
and minimum aggregate amount. Moreover, a single winner may be
selected for each range.
[0086] Once the bidding is closed, the auction platform may confirm
that a successful round has been completed, meaning at a minimum
that all submitted bids are valid and a quorum of valid bids is
present.
[0087] Following auction validation, seller may be presented with
the full spectrum of anonymized "Best and Final" bids to select the
curve that best suits their business needs, as shown for example in
FIG. 5G, with an indication from the system of the best curve based
solely on price.
[0088] Sellers may also be provided with tools via their auction
screens to aid in decision making, such as the ability to turn on
and off individual curves on graph, ability to mouse over a
specific point on the curve to view the underlying price, ability
to view contract term specifics and the ability to view submitted
bids as lists of prices (see FIG. 5H). The seller will then be able
to select an individual curve as the winner and be prompted to
confirm the execution of the fill prior to completion of the
order.
[0089] Alternately, the platform may support other auctions
methodologies, such as the following: [0090] 1. Full curve quantity
variable: auction where bidders submit prices and quantities for
the entire curve being auctioned. [0091] 2. Vintage All or nothing:
bidders submit prices per vintage desired, where the winning bidder
received all RECs for the specified vintage. [0092] 3.
Vintage/Quantity variable: as described in more detail below,
bidders submit prices and quantities for desired vintages, winners
will receive full or partial fills per vintage. Quantity groups may
be defined at the range level and bid on accordingly, e.g. an
auction for 10,000 RECs per vintage, may have a lot size set at
1,000 RECs per year. Bidders may input a price per vintage and a
number of lots to be bid on, on a per range basis. [0093] 4.
Display Rank: Bidders will be shown their rank in the auction
through the open bidding phase and will disappear during the 2
minute window prior to auction close. [0094] 5. Unit Contingent:
Auction of a variable number of RECs for future vintages to be
produced from specific projects. The event may or may not occur
subsequent to the multi-term auction of a firm amount for the same
project.
[0095] Additionally, an automated fills methodology may be used in
connection with any multi-term auction. In one or more embodiments,
the automated fills methodology may include a two-step process in
which the first step is bid ranking and the second step is bid
filling. In the first step--bid ranking--valid bids in each range
may be ranked independently based on a series of predetermined
criteria. By way of a non-limiting example, the bid ranking may be
based on the following criteria, listed in descending order of
consideration: [0096] Total average price of the range; [0097] In
the event of a tie for the above criteria, price in first year of
Range; [0098] In the event of a tie for the above criteria, price
in second year of Range; [0099] In the event of a tie for the above
criteria, price in n year of Range; [0100] In the event of a tie
for the above criteria, quantity; and [0101] In the event of a tie
for the above criteria, time stamp.
[0102] In the second step--bid filling--ranked bids may be filled
independently for each range. This may be done in descending order
until the quantity filled equals the available quantity. In the
event that filling the next incremental bid would result in the
quantity filled being greater than the available quantity, the
final bidder may be filled only partially such that the quantity
filled equals the available quantity.
[0103] Referring now to FIG. 6A, depicted is another embodiment of
the auction module 130 of FIG. 1A. However, in the embodiment of
FIG. 6A, the auction module 600 is configured to implement a
multilateral auction of RECs (or any other environmental commodity)
which consists of two rounds--price submission and trading.
[0104] Once a quorum of bidders is achieved, participants may
utilize an auction screen to begin submitting bids (see FIG. 6B).
Submitted prices may be validated against various criteria set
during auction setup, such as participant type (i.e., buyers must
submit a bid while sellers must submit an offer) and price (i.e.,
prices may be required to be greater than X % (e.g., 25%) of the
compliance price, while also not being greater than the compliance
price plus some additional percentage). Participants may be given a
warning prior to the close of bidding, followed by an alert once
the auction is closed to further bidding.
[0105] Following the close of Round 1, a market clearing price will
be determined. In certain embodiments the market clearing price is
determined after remove prices that cross, and eliminating prices
that are more than X (e.g., 2, 3, etc.) standard deviations from
the mean of all submitted prices. Finally, the average of the Y
(e.g., 3, 4, etc.) best bids and best offers in both directions is
computed as the market clearing price.
[0106] Following validation of Round 1, Round 2 will begin with
participants utilizing their auction screens to submit the quantity
desired at the market clearing price to either buy or sell (see
FIG. 6C). Submitted quantities may then be validated against
certain criteria, such as participant type (i.e., buyers must
submit a bid while sellers must submit an offer) and quantity
limits (i.e., validated against existing trade limits).
Participants may be given a warning prior to the close of bidding,
followed by an alert once the auction is closed to further
bidding.
[0107] As with the previous auction types, once bidding is closed,
the auction platform may confirm that a successful round has been
completed, meaning at a minimum that all submitted bids are valid
and a quorum of valid bids is present.
[0108] Upon auction validation, orders may then be filled on a
pro-rata basis in which orders may be sorted by direction and
participant ranking during Round 1, which is based on how
aggressively the participant bid or offered during the Round 1.
[0109] If more than one order exists at a winning participant
level, the orders may be filled in the following manner: [0110] If
the total quantity of the winning orders at a participant level are
less than or equal to the total quantity remaining to be bought or
sold, all orders will be fully filled. [0111] If the total quantity
of the winning orders at a participant level exceeds the total
quantity remaining to be bought or sold, a straight percentage
calculation will be applied to the quantities of the orders versus
the total quantity to be bought or sold. Each winning order will
then be filled pro-rata basis.
[0112] Still another aspect of the invention relates to the
confirmation/reporting aspects of a completed auction. In
particular, following the order filling process, a "trade ticket"
may be generated and sent to both the buyer and seller. The trade
ticket may include one or more of the identity of the Counterparty,
Instrument, Buy/Sell, Quantity, Vintage, Price, and Delivery
instructions. Such trade tickets may be sent using email,
electronic file, fax, etc.
[0113] Additionally, a trade confirmation may be generated by the
auction platform and forwarded to buyers and sellers as
confirmation. The trade confirmation may include any of the trade
details, including for example, trade date, parties identity, type
of product (e.g., standard RECs, generation contingent, unit
contingent, etc.), amount, vintage, price, delivery date(s), method
of transfer (e.g., GIS REC tracking system), compliance with
applicable programs, whether regulatorily continuing, etc. In
addition, some or all of this information may be similarly
forwarded to various necessary third parties (e.g., registries,
etc.).
[0114] Additionally, part of the confirmation process is to
generate and deliver reports specifically intended for active
buyers and the seller of RECs. For example, seller reports may
include an audit trail of final bids including price per vintage
and quantity, number of participants, while buyer reports may
include number of participants, percentage of quantity sold and the
indicative average price. The aforementioned confirmation/reporting
operations may be carried out by a post auction module, such as
module 140 of FIG. 1, or the post auction module 700 depicted in
FIG. 7.
[0115] The post auction module of the present invention (e.g.,
module 140 of FIG. 1) may also be used to carry out trade
settlement operation. In certain embodiments, there may be distinct
time frames (single- or multi-term) which follow different paths to
completion. The paths to completion may be dependent on the
counterparty's credit relationships, i.e., either utilizing trading
agreements or financial security.
[0116] With reference now to FIG. 8A, depicted is one embodiment of
a post auction module 800 carrying out spot settlement where the
counterparties have a trading agreement relationship. Specifically,
two days after the auction day, the buyer is to deliver cash to the
seller's account equivalent to the nominal amount of their filled
orders. The seller may then confirm receipt of funds. Additionally,
three days after the auction day a number of RECs equaling the
quantity of filled bids may be delivered to the account(s) of
buyer(s). It should of course be appreciated that the day of the
cash settlement may be before or after the second day, and that the
REC settlement day may be before or after the third day.
[0117] Referring now to FIG. 8B, depicted is one embodiment of a
post auction module 810 carrying out spot settlement where the
counterparties utilizing financial security rather than a
preexisting trading agreement. Specifically, two days after the
auction day participants (buyers) using Letter of Credit as
Financial Security may deliver cash to an escrow account equivalent
to the nominal amount of their filled bid and fees. Three days
after the auction day financial security may be returned to
participants (buyers) without filled bids. Additionally,
participants (buyer) with filled bids who have used cash as
financial security may receive back their financial security less
the nominal amount of any filled bid and fees. Finally,
participants (buyers) with filled bids who have used a Letter of
Credit as financial security may not receive back funds, but rather
a separate payment equaling the nominal amount of the filled bid
and fees may be delivered two days after the auction day. It should
of course be appreciated that the day of the cash settlement may be
before or after the second day, and that the REC settlement day may
be before or after the third day.
[0118] Referring now to FIG. 8C, depicted is one embodiment of a
post auction module 820 carrying out multi-term settlement where
the counterparties have a trading agreement in place. Specifically,
all deliveries and payments may be made in accordance with the
existing trading agreements and will conform to counterparty
requirements and obligations. Additionally, on the vintage date the
buyer may deliver cash to seller's account in an amount equivalent
to the nominal amount of their filled orders for the specific
vintage. The seller may then deliver RECs equaling the quantity of
the filled order for the specific vintage to the account of the
buyer.
[0119] Referring now to FIG. 8D, depicted is one embodiment of a
post auction module 820 carrying out multi-term settlement where
the counterparties utilize financial security rather than a
preexisting trading agreement. In this embodiment, vintage
transactions may occur on a delivery-versus-payment basis, with
each party receiving payment following the completion and
confirmation of delivery.
[0120] On day two after the auction date, participants without
filled bids may have their total financial security returned to
their bank accounts per the agreed to settlement instructions.
Thereafter, on the day before the vintage date, participants
(buyers) with filled bids may delivery payment equaling the nominal
amount of the filled bid per vintage to a designated escrow
account. Thereafter, on the actual vintage date, a number of RECs
equaling the quantity of filled bids per vintage may be delivered
to the registry accounts of winning bidders as per settlement
instructions. Finally, on the day after the vintage date the
equivalent of the nominal amount of all filled bids per vintage
less fees may be delivered to the seller's bank account per
settlement instructions.
[0121] While certain exemplary embodiments have been described and
shown in the accompanying drawings, it is to be understood that
such embodiments are merely illustrative of and not restrictive on
the broad invention, and that this invention not be limited to the
specific constructions and arrangements shown and described, since
various other modifications may occur to those ordinarily skilled
in the art.
* * * * *